Explore audio highlights, further reading that will help you delve deeper into this week’s episode, and vigorous conversations in the form of our comments section below.

READER COMMENTS

Unit
Dec 10 2007 at 10:23am

Newtonian mechanics was mentioned, however quantum mechanics seems more relevant. To put it naively, at the beginning of the last century, physicists came up with experiments where the same elementary particle acted like a “particle”, i.e. like a billiard ball, in one experiment, and acted like a “wave” in another experiment (refraction, etc…).
The particle/wave duality of matter is now accepted even though it’s highly unintuitive, but people often say “it works, so it must be right”. The discussion about NY Central Station reminded me of this. Yes one should realize that individual are the agents, but orders do emerge that seem to have a global reach. The Martian could very well have developed a theory of waves that show up and collide (humans and trains) etc…The wave of quantum mechanics is in fact a probability density that can be interpreted as the probability of finding the particle in a certain area. This interpretation allows to merge the two aspects of localized particles versus waves with a global reach. It seems to me such a scheme could be applied to people. Individuals play the role of particles, but individuals also have a certain knowledge about the world and certain expectations, which gives them a global reach, that could be the wavy aspect.

Steve Woods
Dec 10 2007 at 11:48am

Russ-

Great podcast…as usual!

The simplest and best explanation of marginal utility that I’ve come across is that of the ownership of exotic cats. If you had one, you’d put a high price on it. If you had 350, you’d likely give the last one away for free. And also the illustration of new songs that you really like when you first hear them. You can’t wait to hear it again. But a year later when you’ve heard it a zillion times, you’re more like to change the station and find something else to listen to. And also, elementary teachers may be doing something more important than big league ball players, but no one will buy a ticket to watch the classroom action.

Don Lloyd
Dec 10 2007 at 1:40pm

Russ,

It is striking that you can produce such a long list of references and not include a single one to the Mises Institute. For some reason you seem to prefer to point people to Amazon even when the Mises Institute has the same material in both printed and free pdf forms.

I will now continue to port your mp3 interview of PB to my preferred portable player and listen to it this afternoon.

Thanks, Don

robert
Dec 11 2007 at 8:50am

I agree with Don in re references. I’m the Platonic embodiment of your target group – a layman interested in the Austrians – and the Mises site is the best source I’ve found. In particular, there’s a terrific six-part lecture series entitled The History of Economic Thought: From Marx to Hayek that provides a quick outline of Austrian thought. I listened to it this summer over the course of a week of runs. As an added bonus, the speaker is Murray Rothbard, a witty and charming raconteur – a kind of right-wing Woody Allen.

Thanks to you and Dr Boettke for another entertaining and informative podcast.

muirgeo
Dec 11 2007 at 10:46am

Wow! I almost turned this one off after the first 15 minutes thinking it was more targeted at the economic nerd equivalent of a group of people at a Star Wars convention talking about their favorite heroes. Glad I didn’t because you brought it all together in the end so much so that I had so many questions and thoughts on the issues I don’t know where to start. At the current my best summary question would go to the issue of free will…. do we have any? Is economics supposed to be this deep?

I’ll try to formulate something cogent for to post after the days work.

Guys thanks for the tip on the Mises Institute. The lectures sound like a great deal.

Jeff Henderson
Dec 11 2007 at 7:29pm

As always, fantastic podcast. A few months ago, I went up to the economics department at my university (University of Calgary), and asked if there were any Austrian economists. All I got were blank stares. Some of them hadn’t even heard of Austrian Economics.

I’ve pretty much spent the last few months soaking in the resources available at mises.org full-time (my job allows me to listen to my iPod, and I fill it mostly with lectures from the Mises Institute).

This was a great introduction to the Austrian School, but there is so much left to be covered. I wonder if you could do a podcast in the future that covers the following, more juicy and controversial claims of the flavor of Austrianism expounded by the Mises Institute:

– That the business cycle is caused by the inflationary policies of the Fed, and a commodity standard (such as the gold standard) is the only sound monetary system.

– That true monopolies cannot arise in a free market.

– That the market could provide security, roads, and law in a society without government.

andy
Dec 12 2007 at 6:21am

This is an interesting article from Roderick T. Long on the Friedman’s article on abstraction: http://www.mises.org/asc/2004/long.pdf

A. Luque
Dec 12 2007 at 7:54am

Just a comment on the Central Station topic: as the podcast mentions,
the Martian could actually extract many laws from the observation of
“bodies” and “boxes” without actually understanding anything about the
motivation or the underlying behavior of individuals. But I do not see
why these laws should be ignored or neglected in favor of more
individual-centered observations.

Let me provide an analogy from the history of physics: the observation of
purely macroscopic phenomena such as temperature led to the laws of
thermodynamics. These laws were testable, accurate and actually quite
useful for our daily lives. It was not until many years later that the work of
Boltzmann and others allowed us to understand these laws from a
microscopic point of view, as resulting from the statistical average of the
behavior of single particles. Nowadays thermodynamics (macroscopic)
and statistical physics (microscopic) happily coexist and nobody would
disregard the first just because it fails to consider that bodies are
composed by small particles. They just describe the same reality
at different levels.

A similar perspective could be applied to the Central Station problem.
I think the individual-centered and the collective-centered
(or statistical) descriptions do not contradict but complement each other.
Why predictions such as “on rainy days there are more bodies coming out
from the boxes” or “on summer there are less bodies” should not be considered
a valuable knowledge?

Per Kurowski
Dec 12 2007 at 11:06am

This program remind us again of how strange some of us feel about the fact that free marketers have sat there in silence, without protesting loudly, when the bank regulators imposed their financial commissars or Blackwater type operators on the financial markets.

It is very sad when a developed nation decides making risk-adverseness the primary goal of their banking system and places itself voluntarily on a downward slope, since risk taking is an integral part of its economic vitality, but it is a real tragedy when developing countries copycats that and falls into the trap of calling it quits.

http://www.un.org/esa/ffd/hld/HLD2007/UN_FFD_Statement_Basel_Accord.pdf
http://subprimeregulations.blogspot.com/2007/10/basel-please-give-us-back-our-risks.html

Jeff Henderson
Dec 12 2007 at 11:09am

A luque,

I think you are right that those methods can get us some pieces of valuable knowledge. Such knowledge may have some predictive power, but it can never have explanatory power. The true causes of the observed phenomena are human choices. Human action necessarily involve agents choosing means to obtain an end. But concepts like “means” and “ends” cannot be abstracted from purely empirical study. You must have some a priori knowledge of how humans act in order to truly understand what is going on,

Brian-NJ
Dec 13 2007 at 9:27pm

Thanks Russ for continually taking a moment to halt the discussion and give a quick breakdown of what you are talking about. I found this podcast very helpful. The multiple links to the books mentioned and suggested was also a wonderful bonus which I intend to utilize.

Gordon Jones
Dec 15 2007 at 6:55am

Russ – Outstanding podcast !

Like Muirgeo, I almost shut this episode off after the first 15 minutes of academic banter but I’m glad I stuck with it as I think this is one of the all-time best. I greatly enjoyed the exposure to this topic and feel that there is enough ground to cover in many future episodes. Hopefully we can hear from Pete again some day.

To me, the public choice discussion was fascinating and most closely matches the real world economics that I see on a day to day basis. Yes, supply and demand curves have some explanatory value. However, they in no way match the day-to-day struggles that businesses face when trying to differentiate and grow their markets. Where is the equilibrium point on the demand curve for mobile phones? Is there such a curve? Or, are there dozens based on specific feature sets and market segmentation? From my viewpoint, it’s a messy struggle driven by countless daily decisions that any one of which can sway one way or the other the success or failure of any given model. That’s the world that I see.

Anyway, I love your podcasts. I’m an expat living in Malaysia and eagerly await your weekly show for my long drives to work here. Thanks for your efforts.

Schepp
Dec 16 2007 at 1:53pm

A. Luque and Jeff H.

I think that A. Luque has it right. It is true that there are deeper explanations to everything. Even the deeper explanation that Jeff provides does not get to first principles of why people commute. I don’t doubt that there will be more claims in the future that we have explored the last fontier or that we have a unified theory of physics or that we understand the beginning. But I suspect that the most likely scenario is that there are infinite more details, infinite more time in front of us and behind us. We will always need reasonable abstraction and we will never be absolutely certain of anything. Our survival/happiness will be the judge of the proper amount of abstraction.

Schepp
Dec 16 2007 at 1:53pm

A. Luque and Jeff H.

I think that A. Luque has it right. It is true that there are deeper explanations to everything. Even the deeper explanation that Jeff provides does not get to first principles of why people commute. I don’t doubt that there will be more claims in the future that we have explored the last fontier or that we have a unified theory of physics or that we understand the beginning. But I suspect that the most likely scenario is that there are infinite more details, infinite more time in front of us and behind us. We will always need reasonable abstraction and we will never be absolutely certain of anything. Our survival/happiness will be the judge of the proper amount of abstraction.

Robbie
Dec 18 2007 at 6:35am

Excellent podcast with a very interesting guest.

I am fond of Austrian economics because the Mises Institute reignited my interest in economics which then lead me to sites like this. I took an economics topic in my final year of high-school and another topic during my BSc. Both classes were very dry and didn’t address the basic questions such as the origins of prices, interest rates etc. I find the Austrian explanations for these market phenomena very appealing. I’m not qualified to know how applicable these methods are to highly complex systems but I find the behaviour at the individual level fascinating in itself.

Now I’m seriously considering doing an economics degree in the hope of ending up somewhere like GMU.

russ Bankson
Dec 19 2007 at 1:07am

Excellent discussion. The focus on drawing a larger perspective and avoiding the tiresome internecine debates that often obscure the essential points was refreshing.

I urge you to add Menger’s Principles of Economics to your reading list especially for his description of supply and demand as a duality “producers” and “consumers” use the same principle of opportunity cost and discovery process. Cost is not a concrete fact but the result of the many subjective decisions of the persons who compose the “factors of Production”

David Johnson
Dec 21 2007 at 12:34am

Mises’ “Socialism” showed that the economic calculations necessary for socialism to work are impossible. What I find fascinating is that later Rothbard extended this to demonstrate that the same complexity of economic calculation limited the size of corporations in a free market.

As a former employee of the seventh largest corporation in the world, I have to emphatically agree. Austrian economics explains why my former employer was so dysfunctional. The only reason smaller firms don’t run rings around these behemoths is that we do not operate in a free market. Government privileges and regulations encourage inefficient large corporations.

John Parker
Dec 25 2007 at 8:24pm

Though I enjoyed the pod cast, I couldn’t help but note substantial shortcomings:

1) The most accurate, accessible book on Austrian economics was not listed. Economics in One Lesson by Henry Hazlitt is pertinent, precise and easily digestible. Mises himself proofread the manuscript and Mencken commented positively on the writing.
2) A listener who paid careful attention to the entire pod cast and read every reference apart from Human Action or Man, Economy, and State, would still miss the essential Misesian point: If all other factors are held constant, questions such as whether raising the minimum wage will cause unemployment, or whether creation of new money causes inflation, or whether some people benefit from inflation while others suffer are appropriately answered logically and with apodictic certainty. According to Mises, the finding of any empiric study of such matters says more about the study than about the question itself.

Jeremy
Jan 17 2008 at 5:22pm

Jeff H. wrote –
“I wonder if you could do a podcast in the future that covers the following, more juicy and controversial claims of the flavor of Austrianism expounded by the Mises Institute:

– That the business cycle is caused by the inflationary policies of the Fed, and a commodity standard (such as the gold standard) is the only sound monetary system.”

Considering the relative success of Ron Paul, I think this would be a VERY timely topic. There is a video floating around of a room full of college students chanting “End the Fed” at a Paul rally. This is unprecedented in my short lifetime.

The Mises institute warehouses some very accessible arguments against government intervention in the money supply. The other side is often very technical and confusing (Ron Paul likes to claim this is intentional).


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